Britain enters talks with two consortiums to outsource arms buying

LONDON, Aug 21 (Reuters) - Britain's defence ministry is intalks with two consortiums - led by U.S engineers CH2M Hill andBechtel - that are competing to run its 159 billion pound ($249billion) equipment buying programme to cut delays and costoverruns.

A Ministry of Defence (MoD) spokesman said on Wednesday itwas taking forward commercial negotiations with the CH2MHill-led group that also consists of British firms WS Atkins and Serco Group as well as with Bechtel,supported by PricewaterhouseCoopers and PA Consulting.

Reuters reported last month the government was set to choosefirms for formal discussions and would cut down the number froma list of about 20 interested parties that included QinetiQ and Balfour Beatty.

Britain will be the first country to outsource negotiationswith arms makers such as BAE Systems and Finmeccanica should it proceed with plans to put the DefenceEquipment and Support unit in the hands of a private contractor.

At a time of austerity, the government wants to reform theway the unit buys equipment, a process that has been beset fordecades by cost overruns. It is still considering another optionknown as 'DE&S plus', for which it has not provided details buthas described as an "improvement of the status quo."

The DE&S accounted for almost half of the Ministry ofDefence's (MoD) 34.4 billion pound budget last year and Britain expects to spend 159 billion pounds on militaryequipment between 2012 and 2022.

CH2M Hill's chief executive Lee McIntire resigned as anon-executive director of BAE Systems on Tuesday to avoid anypotential conflict of interest due to the bid.

An Aug. 15 notice published on the government' DefenceContracts Online website showed that the government hopes toissue the contract on Sept. 17 next year. The value of thecontract has not been disclosed.